Flex Fuel for Ag?

Farmers and others in agribusiness wholeheartedly support E85. They want the public to buy flex-fuel vehicles (FFVs) and run them on ethanol. They're willing to set an example by purchasing FFVs for their own use. But are vehicle manufacturers equally committed to replacing gas with grain?

The Big 3 domestic auto manufacturers seem to be getting behind the movement. Quite a few FFVs are in their product lineups now and more are on the way. (See sidebar for a list of the currently available FFVs.) But the range of vehicles they're offering doesn't necessarily align with the vehicle needed to conduct agribusiness.

A Ford Crown Vic, Chevy Impala or Dodge Ram 1500 pickup may be fine for running errands. But what if you're hauling steers to market? What if you need to tow a gooseneck trailer with a tractor on it? If you need serious power from an FFV, you're out of luck.

CAFE standards

Why aren't original equipment manufacturers (OEMs) making FFVs that farmers can use? The most popular theory is that the Big 3 are putting FFV dollars into their best-selling models so that they can leverage their Corporate Average Fuel Economy (CAFE) standards.

Since 1975 the government has required that OEMs meet CAFE standards for the range of vehicles they produce or face penalties. Domestic OEMs have been pushing high-profit, low-fuel-economy vehicles, such as pickups and SUVs, at the risk of dragging down their CAFE numbers. But the government gives manufacturers credit when compiling their CAFE score for the FFVs they produce. So one flex-fuel passenger sedan offsets one SUV in the equation. (The ratio isn't quite one-to-one, and because CAFE standards apply only to vehicles up to 8,500 lbs. gross vehicle weight, bigger trucks and SUVs don't come into play here.) This strategy is especially effective when vehicles used in rental fleets, such as the Ford Taurus, are factored in. Unit sales for these vehicles are high.

Sales volume of big trucks is much lower. Offering big trucks as FFVs wouldn't have a major impact on CAFE numbers. Small car sales are better, but small cars already weight CAFE numbers in an OEM's favor so why allocate resources to making them E85 compatible? People who buy a Ford Focus or Chevy Cobalt may be attracted to those cars' good fuel economy, and making them as FFVs might further increase sales. But the impact on CAFE standards would be negligible.

A recent change in CAFE rules heightens the drama. Since the inception of CAFE, light trucks (a category that includes most pickups and SUVs) have been treated differently. That special treatment is going away. Starting in 2008, light trucks will have to start meeting tighter CAFE standards. By the 2011 model year, all manufacturers will have to comply with the reformed CAFE rules.

When it comes to CAFE standards, it doesn't matter if FFVs are actually run on E85. OEMs get the credit if there's never a drop of E85 put into their vehicles. “Even if they're manufacturing flex-fuel vehicles, they have no vested interest in those vehicles using E85,” says Mark Hamerlinck, communications manager for the Minnesota Corn Growers Association.

“There's a chicken-and-egg proposition here,” he says. “If you don't have enough flex-fuel vehicles, there's less incentive to make fuel and sell it at a retail level. But you can't really make the argument that limited access to fuel is the problem because you can run regular unleaded gasoline in those vehicles.”

Government incentives

OEMs have called upon the government to assist in making alternative fuels in general and E85 in particular more appealing. Upper-level managers from each of the Big 3 presented their case to the Senate earlier this year. Sue Cishke, Ford vice president of environmental and safety engineering, was among those who spoke to a U.S. Senate committee in March. “For ethanol to be a real player in the transportation sector and lessen America's dependence on foreign oil, we need a strong, long-term focus on policies that increase U.S. ethanol production and accelerate E85 infrastructure development,” she said. “We need national research efforts to pursue producing ethanol from more energy-efficient cellulosic materials like rice straw, corn stover, switch grass, wood chips or forest residue.”

Is government intervention necessary to build the ethanol market? “E85 supporters say [the Big 3] can just make their part of the bargain happen if they want to,” Hamerlinck says. “It's important that we have a comprehensive national energy policy that supports renewable fuels, but that shouldn't have a bearing on whether the auto manufacturers produce FFVs. They've been manufacturing them for years without an E85 infrastructure.”

Switch to E85

Hamerlinck says the argument that E85 has limited availability because retailers can't afford to install the infrastructure to sell it is overstated. “The easiest solution is to take out the premium pump,” he says. “Just quit selling premium and switch to E85. Most folks here in Minnesota that have taken out their premium pumps and put in E85 sell more E85 than they did premium if they advertise it by putting E85 on their signs.” The cost of converting existing tanks, lines and pumps is much lower than the cost of installing new equipment. “And if Ford, GM and Daimler Chrysler each put a half-million dollars toward station-building grants, that money would go a long, long way,” Hamerlinck says.

Dan Schwartzkopf, senior vice president of Renova Energy, offered his perspective on the relative demand of E85 and premium gas. “We have a number of customers who have put in E85,” he says. “They left the other grades of gasoline in and the E85 has outsold the premium.” (Renova has an ethanol production facility in Torrington, WY, and storage and distribution terminals in six Intermountain states.)

Schwartzkopf sees a less sinister side to the FFV issue than a corporate desire to tweak CAFE numbers. “I think the promotion of E85 fuels has been so focused on getting it to the everyday traveler that [OEMs] haven't thought about bringing it back into agricultural use,” he says.

Schwartzkopf also points out that the manufacturers consider economies of scale when deciding which vehicles will get the flex-fuel treatment. “I think that for most of the flex-fuel vehicles they've standardized certain motors,” he says. A glance at the list of available FFVs would support this theory.

Speak up

Hamerlinck agrees that economics is important to OEMs, and he says farmers can make a difference. “Go to your dealership,” he says. “Keep hounding these folks. Make your voice heard. Tell them, ‘I want this [bigger FFV]. I would buy this.’ Manufacturers say there's no demand, that people don't ask for these vehicles.”

He recommends that farmers also talk to fuel retailers who aren't offering E85. “Tell them, ‘Look, there are five million flex-fuel vehicles in this country. You could be capturing part of that market if you had E85.’”

And that five million number should put a smile on any farmer's face. Even if you can't buy the vehicle you use every day in flex-fuel configuration, millions of other motorists have done so. They're seeking out E85 retailers. Maybe the OEMs' strategy is the best one for agribusiness: Put the maximum number of FFVs on the road, even if niche markets, such as farming, get overlooked in the process.

But for now the question remains, Why don't OEMs offer the bigger trucks that farmers use? “That would be a good question to pose to the manufacturers,” Schwartzkopf says. “Because who out there is a better cohort in this than a farmer? We don't do anything without the farmer as our partner.”